UK's SFO reopens probe into Weavering hedge fund

LONDON, July 9 Mon Jul 9, 2012 5:45am EDT

LONDON, July 9 (Reuters) - Britain's Serious Fraud Office (SFO) has reopened its investigation into collapsed hedge fund Weavering Capital, just weeks after damages of $450 million were awarded against the fund's manager in a civil case in the High Court.

The decision marks a U-turn by the fraud agency after it ended a 2-1/2 year probe into Weavering last September, saying there was no reasonable prospect of conviction.

Investors were left with hundreds of millions of dollars of losses when the Weavering Macro fund collapsed during the credit crisis. The fund was found to have more than $600 million in interest rate swaps where the counterparty was a firm related to Weavering.

In May this year damages of $450 million were awarded against Weavering Macro's manager Magnus Peterson, after a High Court case brought by the liquidators of Weavering's British operation.

Judge Sonia Proudman ruled that the interest rate swaps on which the case centred were a "sham" used to manipulate net asset value figures to give investors the impression the Macro fund was successful.

"The (SFO's) director, following a review of the High Court Civil Judgment by Mrs Justice Proudman on the 31 May 2012, has reopened a criminal investigation into Weavering Capital UK," the SFO said in a short statement on its website.

The move is another major decision by SFO Director David Green, who took over from Richard Alderman in April and who told Reuters last month the SFO has to "prove itself".

Last week the SFO said it would investigate the manipulation of interbank lending rates and last month it dropped its probe of property tycoon Vincent Tchenguiz.

The decision last September to end the investigation into Weavering, which raised questions over London's ability to uncover and punish white-collar crime, came just days after a Cayman Islands court awarded damages of $111 million against two of the fund's directors.

During its investigation the SFO made two arrests in May 2009, including Peterson.

"The decision of the SFO to re-open the investigation is welcomed by Weavering's investors. They and the professional advisers involved in the case will provide every assistance to the SFO," said Jones Day partner Barnaby Stueck, who represented the liquidators in the civil case.

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